The Company leases facilities under

non-cancelable

operating lease agreements. The Company leases a portion of its capital equipment and vehicle

, certain land and buildings for its facilities in Thailand, the Cayman Islands, China, the United States, the United Kingdom and Israel under operating lease arrangements that expire at various dates through 2025. Certain of these lease arrangements provide the Company the ability to extend the lease from one to five years following the expiration of the current term. However, the Company has excluded all lease extension options from its ROU assets and lease liabilities as the Company is not reasonably assured that it will exercise these options.

None of the lease agreements contain residual value guarantees provided by

the

lessee.

The Company also has one intercompany lease transaction which is a lease of office and manufacturing space between Fabritek and Fabrinet West.

Operating leases

The Company determines if an arrangement contains a lease at inception. The Company applies the guidance in ASC 842 to determine whether a contract is, or contains, a lease. A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating leases are included in operating lease ROU assets and operating lease liabilities within the Company’s unaudited condensed consolidated balance sheets. The Company rents certain real estate under agreements that are classified as operating leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent) separately from the

non-lease

components (e.g., common-area maintenance costs).

The following table shows the impact of adoption of ASC 842 on the adoption date of June 29, 2019 on the consolidated balance sheets:

Consolidated Balance Sheets


	Impact of Adopting ASC 842
(amount in thousands)	Balance at June 28, 2019		Adjustment		Balance at June 29, 2019
Assets
Operating lease ROU assets	$	—	$	5,370	$	5,370
Liabilities and Shareholders’ Equity
Operating lease liabilities, current	$	—	$	1,601	$	1,601
Operating lease liabilities, non-current	$	—	$	3,769	$	3,769

As of March 27, 2020, the maturities of the Company’s operating lease liabilities were as follows:


(amount in thousands)
2020 (remaining three months)	$	486
2021		2,131
2022		2,000
2023		1,895
2024		878
Thereafter		15

Total undiscounted lease payments		7,405
Less i mputed interest		(488	)

Total present value of lease liabilities	$	6,917	(1)

(1)	Include s current portion of operating lease liabilities of $1.9 million.

Rental expense related to the Company’s operating leases is recognized on a straight-line basis over the lease term. Rental expense for long-term leases for the three and nine months ended March 27, 2020 was $0.5 million and $1.5 million, respectively. Rental expense for short-term leases for the three and nine months ended March 27, 2020 and March 29, 2019 was de minimis.

The following summarizes additional information related to the Company’s operating leases and

nance

leases:


	As of March 27, 2020
Weighted-average remaining lease term (in years)
Operating leases		3.7
Finance leases		0.5
Weighted-average discount rate
Operating leases		3.8	%
Finance leases		4.1	%

The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:


(amount in thousands)	Nine Months Ended March 27, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,794
Financing cash flows from finance leases	$	304
ROU assets obtained in exchange for lease liabilities	$	7,175
Finance lease assets	$	157